Canberra, March 13 - A global downtrend in the price of dairy products evident since late 2007 could begin to moderate, according to an analysis issued Thursday by Rabobank Australia Ltd.
With the rate of U.S. production growth slowing, dry conditions in New Zealand and rising prices for dairy substitutes, "the pace and extent of any further short term market correction in the dairy production complex could prove modest," Rabobank said in a monthly review of the sector.
That said, the key influences on the global traded market remain the improvement of export supply from the U.S. and Europe and softening demand growth in the face of unprecedented retail price inflation for dairy products, it said.
The softening of dairy product prices has been asymmetric, it said, with skim milk powder falling faster than other product lines to be 23% below a late-2007 peak, while whole milk powder rose in February to now be just 10% off the previous high. Butter and cheese have also fallen only modestly from their peaks.
This divergence appears to relate to the origin of the product, it said.
The U.S. and Europe tend to be large skim milk powder exporters, with rising supply likely to have enabled increased export volumes from both regions in recent months, it said.
In contrast, Argentina and New Zealand tend to produce more whole milk powder, with weak supply conditions in these regions inhibiting exports at present, it said.
"Recent growth in U.S. milk supply is likely to ensure further spillage into export markets in coming months and global demand for all commodities is likely to remain impacted by high pricing," Rabobank said.
The world price for butter was quoted Feb. 29 at US$4,050 per metric ton, unchanged on month but double on year; skim milk powder was down 5.9% on month, but up 27% on year at US$4,000/ton; whole milk powder was up 3.4% on month and 47% higher on year at US$4,550/ton; cheddar was at US$5.175/ton, down 2.4% on month, but up 74% on year, the bank reported.